2017 Law Requires Employer Electronic Filing

Q: I am a small business owner and I was told that I must now file employee taxes and reports electronically. Is this true?

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A: Yes, Assembly Bill (AB) 1245, pursuant to the author Assembly Member Cooley, ‘Would phase in over a two-year period the required use of electronic filing for all California employers to submit returns and remit payments to the Employment Development Department (EDD).’

This Bill was originally going to be implemented on January 1, 2016 as proposed to the Assembly Committee on Insurance on February 27, 2015. However, the Amended Bill that was presented on April 6, 2015 to the Committee, postponed the beginning of the implementation of this new law to January 1, 2017.

Beginning January 1, 2017, all employers with 10 or more employees must begin electronically filing and paying employment tax returns, wage reports, and payroll tax deposits to EDD. All remaining employers must begin the electronic filing on January 1, 2018.

For employers that are not already utilizing electronic filing, employers will be able to use e-Services for Business to comply with the e-file and e-pay mandate. This is the recommended method for managing your tax account and does not require special software. Utilizing this online service will allow employers to register for an employer payroll tax account number, file returns and reports, make payroll tax deposits and pay other liabilities, review and update account information.

Other e-file and e-pay options include Federal/State Employment Taxes (FSET) for Bulk Transmissions which is a web-service based application-to-application transmission platform. Or Electronic Funds Transfer (EFT) which is an electronic method for making payments to the EDD through an Automated Clearing House (ACH) Debit/Credit method.

Should an employer utilize an outside representative or payroll agent, the employer should make sure they are electronically submitting their employment tax returns, wage reports, and payroll tax deposits to the EDD by the designated date. Although an employer may have a representative or payroll agent, it is highly recommended that they enroll in e-Services for Business to monitor the payroll tax account online.

This mandate does contain a waiver provision for employers who are unable to electronically submit taxes, reports and deposits. The EDD will accept waiver requests from employers beginning July 2016. To request a waiver, employers must complete and submit the E-file and E-pay Mandate Waiver form and fax or mail to the EDD. Employers will need to contact their local office for complete details.

Once fully implemented and utilized by employers, this will increase efficiencies for both EDD and the employer community.  This legislation will not only result in many millions in savings to the state in paper, postage and staff time, but it will increase data accuracy, protect data encryption, provide faster processing of returns and payments.

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